King, J. v. Driscoll, C. ( 2023 )

J-A11033-23
2023 PA Super 259JOHN G. KING : IN THE SUPERIOR COURT OF
: PENNSYLVANIA
:
v. :
:
:
CHRISTOPHER P. DRISCOLL :
:
Appellant : No. 1291 WDA 2022
Appeal from the Order Entered October 14, 2022
In the Court of Common Pleas of Allegheny County
Civil Division at No: GD 21-004533
BEFORE: BENDER, P.J.E., STABILE, J., and PELLEGRINI, J.*
OPINION BY STABILE, J.: FILED: DECEMBER 7, 2023
Christopher P. Driscoll (Driscoll) appeals from the order entered in the
Court of Common Pleas of Allegheny County (trial court) granting the petition
to enforce settlement filed by Driscoll’s former business partner, John G. King
(King). According to Driscoll, the settlement agreement was not binding
because it had been sent by his attorney to King without Driscoll’s prior
authorization. In our initial review of the settlement order, this Court
remanded the case back to the trial court for additional findings as to whether
Driscoll in fact authorized his attorney to send the proposed agreement to
____________________________________________
* Retired Senior Judge assigned to the Superior Court.
J-A11033-23
King.1 The trial court entered new findings in response, determining that
Driscoll’s attorney indeed had such authority. See Trial Court 1925(a)
Opinion, 9/13/2023, at pp. 4-9. As the trial court’s findings are supported by
the record, we affirm.
The relevant facts and procedural history of the case have been
previously summarized by this Court as follows:
Driscoll and King are each 50% owners of two LLCs that operate
a restaurant and its building in Bellevue near Pittsburgh. When
their business relationship soured, Driscoll wanted out of the
business and asked King if he would be willing to buy Driscoll’s
membership shares. As a result, both parties obtained counsel to
negotiate the buy-out of Driscoll’s shares in March 2021. King
hired Attorney David Fuchs and Driscoll hired Attorney Daniel
Conlon. The two attorneys began negotiations in March 2021 but
were unable to reach an agreement. The negotiations resumed
several weeks later in May 2021. During this round of
negotiations, Attorney Conlon emailed Attorney Fuchs a term
sheet summarizing their negotiations and asked, “if we are in
agreement on all terms.” Attorney Fuchs responded by adding
handwritten notes to the term sheet, and Attorney Conlon
incorporated those notes into another draft that he sent to
Attorney Fuchs a few days later. Attorney Fuchs emailed him back
with a “redlined” copy of the agreement “with mostly clarifications
and a few details.” The next day, which was May 20, 2021,
Attorney Conlon replied that he accepted most of the changes and
had “sent the agreement to Driscoll for his review,” while also
highlighting those changes in the draft that he did not accept.
Attorney Fuchs responded that same day: “Client has approved
your redline. Please get your client’s signature and send me a
clean copy for my client to sign.”
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1 This Court explained in King v. Driscoll, 296 A.3d 1178, 1186 (Pa. Super.
2023), that it could not adjudicate the validity of the settlement agreement
until the trial court first made findings of fact as to Driscoll’s authorization.
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Attorney Fuchs believed that they had an agreement but when
Attorney Conlon did not send him back a clean copy for King to
sign, Attorney Fuchs followed up with another email asking him to
send a “clean version so we can get this done.” Again, however,
there was no response. Finally, when Attorney Fuchs tried again
a few weeks later, Attorney Conlon emailed him a letter in which
he asserted that “the parties have neither negotiated nor reached
a settlement agreement.” Attorney Conlon emphasized that he
never represented that they had reached a settlement agreement,
noting that in his last email, he wrote that he was sending the
agreement to Driscoll for his review. Attorney Conlon also claimed
that during a May 21st phone call, he told Attorney Fuchs that
Driscoll needed a copy of the restaurant’s RRF application before
he would sign off on the agreement.
On June 16, 2021, King filed a petition to enforce settlement
alleging that the parties, through their attorneys, had reached an
agreement on all material terms despite never signing the
agreement. Because Driscoll disputed that an agreement was
reached, the trial court held an evidentiary hearing. At the
hearing, Attorney Conlon testified that he negotiated the
agreement on behalf of Driscoll but never had his express
authority to agree to the terms of the agreement without Driscoll’s
final approval. Attorney Conlon also claimed throughout his
testimony that Driscoll would not sign a final agreement unless he
first obtained the restaurant’s RRF application. Driscoll reiterated
the same as he continually claimed throughout his testimony that
Attorney Conlon could not finalize the agreement unless he
obtained the RRF application that King submitted on the
restaurant’s behalf to the Small Business Administration.
Disputing that the RRF application was ever an integral part of the
negotiations, King emphasized that neither the term sheet nor the
draft agreements contained any mention about the application
being an essential term of the agreement. On top of that, King
called an accountant as a witness to show that the funds received
from the SBA – $370,000 – had to be used for operating expenses
and could not be used to pay Driscoll. Consequently, King
characterized Driscoll’s claim concerning the RRF application as a
misleading, after-the-fact excuse for getting the agreement that
he and Driscoll reached through their attorneys’ extensive
negotiations and exchange of term sheets and draft agreements.
On July 21, 2022, the trial court granted King’s petition to enforce
settlement. In its two-page memorandum explaining its
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reasoning, the trial court did not address whether Attorney Conlon
had Driscoll’s express authority to finalize the agreement without
first obtaining the RRF application. Rather, the trial court
concluded that, even though the agreement was never signed,
“[t]he accepted redline version in conjunction with the term sheet
establish[ed] the essential terms of the parties’ agreement.”
Following the trial court’s decision, Driscoll timely moved for post-
trial relief under Pa.R.Civ.P. 227.1. King responded by reasserting
his arguments at trial but did not otherwise contend that Driscoll’s
filing was improper. After the motion was denied, Driscoll filed
this appeal.
****
On appeal, Driscoll raises two main arguments for why the trial
court erred in concluding that the parties reached an agreement.
First, he disputes that the attorneys’ negotiations resulted in a
binding, enforceable agreement. In particular, he focuses on the
May 20th email that Attorney Conlon sent to Attorney Fuchs in
response to the “redlined” draft of the agreement. In that email,
Attorney Conlon wrote that he accepted most of Attorney Fuchs’s
changes and that he was sending the agreement to Driscoll for his
review. Attorney Conlon, however, did not accept all of the
changes, as he highlighted those with which he did not agree.
Driscoll contends that this email shows not only that the attorneys
had not yet agreed on all the necessary terms, but also that he
had not yet approved the agreement.
Second, and related to the first part, Driscoll contends that he
directed Attorney Conlon to obtain a copy of the restaurant’s RRF
application. Driscoll asserts that this was an essential part of the
parties’ negotiations and that he would not give his final approval
to any agreement unless he first obtained and reviewed the
application. Because he never received the application, he never
gave Attorney Conlon the express authority he would have needed
to finalize the agreement.
King v. Driscoll, 296 A.3d 1178, 1180-84 (Pa. Super. 2023) (footnotes and
internal citations omitted).
“When reviewing a trial court’s decision to enforce a settlement
agreement, our scope of review is plenary as to questions of law, and we are
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free to draw our own inferences and reach our own conclusions from the facts
as found by the court.” Salsman v. Brown, 51 A.3d 892, 893–94 (Pa. Super.
2012) (citation omitted). On appeal, the evidence must be interpreted in the
light most favorable to the prevailing party. See id. This Court is bound by
the trial courts findings of fact, as long as they are supported by competent
record evidence. See id. The same is true as to the trial court’s credibility
determinations, as the trial court had the opportunity to view and assess the
witnesses first-hand. See Lewis v. Lewis, 234 A.3d 706, 711 (Pa. Super.
2020) (citation omitted).
A settlement agreement is enforceable in the absence of a formalized
writing where all the elements of a contract are met and the parties have
orally “come to a meeting of the minds on all essential terms[.]” Commerce
Bank/Pennsylvania v. First Union Nat. Bank, 911 A.2d 133, 147 (Pa.
Super. 2006). However, while the settlement agreement need not be reduced
to writing, an attorney must still have authority to settle their client’s case.
See Baribault v. Zoning Hearing Bd. Of Haverford Twp., 236 A.3d 112,
122 (Pa. Cmwlth. 2020). Indeed, “[t]he ordinary employment of an attorney
to represent a client with respect to litigation does not confer upon the
attorney the implied or apparent authority to bind the client to a settlement
or compromise, and the attorney cannot do so in the absence of such express
authority.” Id. (Citations omitted).
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For an attorney to be granted authority to bind a client to a settlement
agreement, express permission must be granted in definite terms:
The rationale for this rule stems from the fact that parties settling
legal disputes forfeit substantial legal rights, and such rights
should only be forfeited knowingly. See, e.g., Starling, 3 A.2d
at 388 (“apparent or implied authority does not extend to
unauthorized acts which will result in the surrender of any
substantial right of the client, or the imposition of new liabilities
or burdens upon him”). As such, a client’s attorney may not settle
a case without the client’s grant of express authority, and such
express authority can only exist where the principal specifically
grants the agent the authority to perform a certain task on the
principal’s behalf. See Restatement (Second) of Agency § 7 cmt.
c (1958).
Reutzel v. Douglas, M.D., 870 A.2d 787, 790 (Pa. 2005).
Where the validity of a settlement agreement is disputed based on an
attorney’s lack of authority, the agreement may only be deemed valid if the
attorney’s express authority has been proven. See Brannam v. Reedy, 906
A.2d 635, 640 (Pa. Cmwlth. 2006) (citing Redevelopment Auth. of the City
of Phila. v. L & A Creative Art Studio, Inc., 294 A.2d 606, 607 (Pa. Cmwlth.
1972)).
In the present case, the parties’ dispute concerns whether Driscoll had
approved a draft of a settlement agreement sent to and accepted by King on
May 20, 2021. Although Driscoll had not signed a final version of the
document, King contends that it was nevertheless a binding contract because
Driscoll had agreed to all the material terms conveyed by his attorney.
The materiality of the RRF application is critical to our disposition
because it settles the issue of whether Driscoll’s attorney (Conlon) had express
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authority to settle the case. Since Driscoll admits that he had agreed to all
the terms that Conlon ultimately conveyed to King on May 20, 2021, it follows
that if the disclosure of the RRF application was not a material term at that
time, then its omission would be irrelevant, and the negotiation concluded
once King accepted that version of the agreement on the same date.
As discussed above, King and Driscoll have presented conflicting
interpretations of the record with respect to whether a settlement was
contingent on the RRF application. Driscoll and his attorney (Conlon) both
testified that Conlon was only authorized to settle the matter if an agreement
required King’s disclosure of that document. See Evidentiary Hearing
Transcript, 2/14/2022, at p. 26; Evidentiary Hearing Transcript, 12/20/21, at
pp. 12, 16-18. Conlon described this as “the central issue during the
negotiations,” and a “vital point” as of May 20, 2021, when all other material
terms had been agreed to. Id, at pp. 20, 30.
But according to King, the settlement was not contingent on Driscoll’s
receipt of the RRF application, and the parties’ mutual acceptance of the
material terms on and before May 20, 2021 made the draft settlement binding.
King pointed to the unrefuted testimony of J. Michael Sabatini, a CPA who
testified before the trial court that RRF funds may only “be used in operations”
such as payroll, supply costs, and maintenance of the restaurant. Evidentiary
Hearing Transcript, 2/14/2022, at p. 5. Such funds could not legally be
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dispersed to a business owner for personal profit or the purposes of a buy-
out. See id., a p. 21.
King also emphasized that the communications between his attorney
(David Fuchs) and Driscoll’s attorney in May 2021 had resulted in a final
agreement. On May 12, 2021, Fuchs emailed Colon following ongoing
negotiations, declaring, “We have an agreement.” Between that date and May
20, 2021, the attorneys repeatedly exchanged draft settlement agreements
which indisputably contained revisions in the form, but not the substance, of
the versions submitted by the other side. It was not until weeks later that
Driscoll denied the existence of a final agreement in writing, citing the
allocation of RRF funds as a reason to “reevaluate the sale price for his interest
in the Companies[.]” Evidentiary Hearing Transcript, 12/20/2021, at p. 34.
The trial court construed the evidence in favor of King, discounting
Driscoll’s claim that any final agreement would be contingent on his receipt of
the RRF application. In its supplemental opinion, the trial court concluded that
Conlon had been given express authority to settle the case, and that the
attorneys’ exchange of final draft agreements had bound their respective
clients. The trial court found that Driscoll’s focus on the RRF grant was only
an excuse to avoid finalizing the settlement with King after an agreement had
already been reached. See Trial Court 1925(a) Opinion, 9/13/2023, at pp. 8-
9.
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The trial court reasoned that if Driscoll had truly considered the RRF
application’s disclosure to be a material term, then it would have been
mentioned at least once in the several draft agreements circulated by Driscoll’s
counsel and reviewed by Driscoll himself:
If the RRF grant were a material term to the agreement, it would
be expected that in at least one of the draft term sheets or
agreements, all of which were prepared by Driscoll's counsel,
mention of the funds and the application would appear. However,
it is undisputed that no document prepared by Driscoll as part of
the resolution of this matter makes any mention of those
documents. Indeed, both Driscoll and his counsel testified
that [Driscoll] was provided copies of all the agreements
and documents circulated between the parties in this
matter. Notably, Driscoll has not produced any evidence
demonstrating that the RRF application or funds were material in
any way to the settlement reached in this matter. Therefore, it is
clear to the Undersigned that there was a meeting of the minds
between the parties which resulted in an agreement being
reached.
Id. (internal record citations omitted, emphasis added).
We find that all the trial court’s factual findings are supported by the
record. Central to the trial court’s findings are that Driscoll and his attorney
both testified to the fact that Driscoll was kept well informed about
developments in the settlement negotiations, and that he approved of all
drafts of the settlement agreements sent to King. See Evidentiary Hearing
Transcript, 12/20/2021, at p. 48; Evidentiary Hearing Transcript, 2/14/2022,
at p. 29. This would include the draft of the agreement that King accepted on
May 20, 2021.
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While there is conflicting evidence as to whether Driscoll had directed
King to make receipt of the RRF application a settlement condition, it was for
the trial court to resolve that conflict, and this Court is bound by the trial
court’s finding of fact in that regard. See Salsman, 51 A.3d at 893–94.
Driscoll’s attempt to prove the import of the RRF application through his own
statements and those of his attorney, was rejected by the trial court as a
credibility determination that we find is supported by the record and now is
binding on this Court. See Lewis, 234 A.3d at 711. As such, we discern no
reason to disturb the trial court’s conclusion that the attorneys for King and
Driscoll negotiated a binding settlement agreement and that the disclosure of
the RRF application was immaterial prior to the conclusion of their
negotiations.
Order affirmed.
DATE: 12/7/2023
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